The Inflation-Resistant Real Asset ETF Portfolio

Over the long term, I believe the best hedge against inflation is equities. All else being equal, a broadly diversified basket of companies will, on average, grow earnings over time and return capital to shareholders through buybacks or dividends. The risk you take as an equity owner compensates you more than just holding cash.

But sometimes inflation gets really nasty. Think the late 1970s, before Fed Chair Paul Volcker stepped in and jacked up interest rates into the double digits. Or more recently, 2022, when another round of aggressive rate hikes sent stocks and bonds tumbling in tandem.

That said, some assets are naturally have a positive correlation with inflation, meaning they tend to go up when inflation does. You can use commodity futures or precious metals, sure—but I prefer assets with actual growth and income potential.

So today, I’m going with two categories that fit the bill: infrastructure and natural resources. Here are two ETFs from FlexShares that give you exposure to each—and how you can combine them into a real asset portfolio that fights inflation and pays you while doing it.

Infrastructure

Listed infrastructure refers to publicly traded companies that own or operate hard assets essential to the functioning of modern economies. Think pipelines, telecom towers, railways, airports, toll roads, ports, utilities, and water systems—the kind of stuff you don’t notice until it breaks.

Infrastructure isn’t a GICS sector (that’s Global Industry Classification Standard, the system most ETFs use to categorize sectors). Instead, it usually spans parts of energy, industrials, and utilities.

What ties it together is the overarching theme: these are mission-critical physical assets with reliable cash flow, high barriers to entry, and long operating lifespans.

Structurally, infrastructure is attractive because many of these companies operate under regulated frameworks or long-term contracts that produce stable, predictable cash flows. These agreements often come with built-in inflation escalators, meaning revenues rise when inflation does.

That’s why you often see pension funds, sovereign wealth funds, and university endowments pouring capital into private infrastructure—they want access to the inflation protection, low correlation, and steady income these assets can offer.

Retail investors don’t typically have access to those private vehicles, but publicly traded infrastructure is a good enough proxy. One of the best ways to access it is through the FlexShares STOXX® Global Broad Infrastructure Index Fund (NFRA).

NFRA tracks the STOXX® Global Broad Infrastructure Index, holds 211 companies, and has about $2.41 billion in assets under management. It charges a 0.47% expense ratio, and the portfolio skews toward large caps, with an average market cap around $74 billion.

As of now, it pays a 2.54% 30-day SEC yield, giving you both above-average income and exposure to real assets with built-in inflation sensitivity.

Natural Resources

When it comes to inflation-sensitive assets, I’m opting for natural resource producer equities over commodity futures—and here’s why.

Trading commodity futures on your own opens you up to the risk of margin calls, since these are leveraged contracts. Accessing them through ETFs isn’t much better.

Many of these commodity ETFs either issue a K-1 tax form (which is a pain to file in Canada or the U.S.), or they hit you with massive year-end capital gains distributions, even if you didn’t sell anything. On top of that, many commodity ETFs are just plain expensive and suffer from something called negative roll yield.

A quick example: let’s say an oil ETF holds front-month crude futures and the market’s in contango (where future-dated contracts cost more than current ones). Every time the fund rolls into the next month to maintain exposure; it’s effectively selling low and buying high. That spread eats into returns over time—death by a thousand paper cuts.

So instead, I prefer natural resource equities—real companies that extract or produce commodities and pay you to hold them. One of my favourite picks here is the FlexShares Morningstar® Global Upstream Natural Resources Index Fund (GUNR).

GUNR tracks a portfolio of about 190 stocks via the Morningstar Global Upstream Natural Resources Index, with a heavy skew toward large caps—the average market cap is about $95 billion. The fund charges a 0.46% expense ratio and pays a solid 3.45% 30-day SEC yield.

What I like about GUNR is that it’s not just oil and gas—although there’s plenty of that (particularly the big integrated giants). It also includes miners of both base metals (like copper and nickel) and precious metals (like gold and silver). Plus, there’s exposure to agricultural producers.

For instance, Nutrien is in the fund—it produces potash and fertilizer, critical to global food production. Corteva is another holding, a major player in seeds and crop protection, helping improve agricultural yields.

In short, GUNR gives you diversified exposure to real, cash-generating businesses that are tied to physical stuff we need to live—and they just so happen to do well when inflation is high.

Putting it together

On a total return and risk-adjusted basis, a 50/50 portfolio of GUNR and NFRA has underperformed the broad iShares MSCI ACWI ETF (ACWI) over the long run.

That’s not entirely unexpected—this portfolio will lag when rates are falling steadily and inflation stays near the 2% target. If you want low correlation to traditional equity markets, you have to accept occasional underperformance as part of the tradeoff.

But take a closer look at the year-by-year results, and you’ll see when this portfolio really shines. In 2022, when inflation peaked and traditional portfolios got hammered, ACWI finished the year down 18.37%. Meanwhile, the GUNR/NFRA duo returned 2.4%—a massive relative win.

And it’s happening again in 2025. As of year-to-date performance through March, the market has stumbled again as tech leads the way down. The GUNR/NFRA combo is up 6.73%, while ACWI is down -1.07%. And that -1.07% figure would look even worse if you stripped out the international exposure and focused solely on U.S. equities.

So, while this isn’t a set-it-and-forget-it portfolio that’ll win every year, it’s a highly useful complement when the market is under stress and inflation is doing its thing.